HHS Rx Price Negotiations Could Gain Bipartisan Support, Consultant Says

Congress will move to strike down the Medicare Rx law's "non-interference" provision in the next two years, former Senate Finance Committee health advisor Kathleen Means said at the Biotechnology Industry Organization's annual conference in San Francisco June 9.

Under the Medicare law, HHS may not interfere with the negotiations between drug manufacturers and Medicare drug plan sponsors, or require a particular formulary or price structure.

"I expect this to be knocked down sometime over the next couple of years," Means said.

Means formerly served as the Republicans' chief health analyst for the Senate Finance Committee, as a staffer for the House Ways & Means Committee, and in the senior executive service at the Centers for Medicare & Medicaid Services. She is currently a partner at Patton Boggs.

Removal of the language is more likely if a Democratic administration takes office, Means noted.

"It will be more likely to be knocked down if Senator Kerry were to become president. [Democrats] have targeted this as the single piece of the Medicare legislation that they most want to have changed."

Congressional Democrats have introduced several bills to abolish the Medicare non-interference clause.

Presidential candidate John Kerry's (D-Mass.) Medicare plan includes allowing HHS to negotiate drug prices for Medicare; he believes a 20% discount on drugs is attainable (¹ , p. 14).

However, the provision could become a tempting target for Republicans as well, Means said.

"Philosophically, the Bush Administration has placed a very strong emphasis on competition, use of private contractors to conduct negotiations."

"However, in every major previous example of being concerned about major expenditures occurring under the Medicare program, it has been a Republican administration that has implemented the most far-reaching price controls," she said.

As examples, she noted that the diagnosis-related group payment codes for Medicare were implemented under President Reagan and the physician fee schedule was implemented under the first President Bush.

Rising cost projections for the benefit may increase pressure to allow Medicare greater negotiating power.

"I think there will be a real dilemma for the administration if, in fact, when the Part D benefit gets implemented, expenditures are way outstripping early projections, which were large to begin with," Means said.

Another strategy that has gained momentum with rising drug prices is allowing importation of drugs from Canada. HHS Secretary Thompson said approval of an importation program appears to be inevitable (² (Also see "Import Portents Aligning: HHS Secretary Says Law May Be Unstoppable" - Pink Sheet, 10 May, 2004.), p. 22).

However, the Congressional Budget Office previously said drug importation would not provide savings to Medicare (³ (Also see "Rx Reimportation Passes House; CBO Score May Keep It Out Of Medicare Rx" - Pink Sheet, 28 Jul, 2003.), p. 13).

CBO has also weighed in on HHS-negotiated prices. Responding to requests from senators to calculate the potential savings, CBO concluded that savings would be "negligible," since government-negotiated prices would be similar to those negotiated by private plans negotiate under Medicare.

Means was skeptical of CBO's low projected savings that would result from striking the provision.

"I personally have a lot of questions...about the particular answer they gave," she said.

The Pharmaceutical Research & Manufacturers of America maintains that the non-interference provision allows patients access to more therapeutic options (⁴ (Also see "Rx Industry Will Sell Medicare Bill; Card Launch Will Be First Test" - Pink Sheet, 12 Apr, 2004.), p. 5).